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Advisors are Far From Ready for This Big Regulation Change

November 1, 2018

Financial advisors aren’t yet prepared for the effects of the SEC’s planned Regulation Best Interest, according to a recent study by Fidelity. An advisor trade group, meanwhile, is concerned the SEC will rush through the steps necessary to gauge how well investors understand some of the changes, InvestmentNews writes.

In 2016, 85% of advisors were aware of the Department of Labor’s proposed fiduciary rule, which purported to require retirement account advisors to put clients’ interests first and was vacated in the spring of 2018, Fidelity found. In contrast, this year 73% of advisors are aware of the SEC’s planned changes to standards of conduct that would apply to all brokers and investment advisors, according to Fidelity’s survey.

What’s more, 40% of the advisors who are aware of the SEC’s planned regulations don’t plan to take any action before they get more clarification. And 78% of respondents say they’ll need help evaluating the SEC’s proposal, Fidelity found.

Advisors also disagree about the effect of the proposed regulation. A third believe it will have a positive impact while another third believes it will be negative, according to the survey.

And the SEC’s regulation may be coming far sooner than many in the industry expected. Karen Barr, president and chief executive of the Investment Adviser Association, expects a final rule by the middle of 2019, InvestmentNews writes. And that may not be enough time to conduct adequate testing of investors’ understanding of the SEC’s proposed client relationship summary, or Form CRS, Barr said earlier this week at Schwab’s Impact 2018 conference in Washington, D.C., according to the publication.

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"Given how quickly they want to do this, I’m worried they’ll post it but not give folks enough time to submit additional comments on it," she said, InvestmentNews writes.

Previously, the IAA submitted an alternative version of Form CRS to the SEC, as reported.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.